What happened with Chinese stock market in 2018?

Chinese Stock Market News

Over the last few weeks, major indexes of US stock markets have dropped palpably. However, things could be much worse. One only needs to take a look at China, where the drop has been happening much longer and is indeed much steeper. Yes, Chinese stock markets in 2018 haven’t been performing well, to put it mildly, and there is much to worry about with the advent of the new year. If you’re looking to invest there, this short recap will tell you what kind of situation you can expect. There are plenty of factors to consider, so just keep reading.

The trade war with the US

OK, first things first. Probably the most famous event concerning China’s economy in the last year was the trade war with the United States. A truce was agreed on with President Trump on December 1, but that didn’t have a lot of positive effects on the market, which speaks volumes about the situation China is facing. There is potential for a bubble of real estate prices there too, not unlike the one seen in the US back in 2007. By the way, the US could also be facing a recession in 2020. On the plus side, though, the government is expected to stimulate more in 2019, and the interest rates are not expected to rise as much as in the US. The reason for that, however, is that the economy is slowing down and there are even concerns about the strength of the yuan in general.

Chinese stock markets in 2018 dropped hard

The main problem and probably the best depiction of Chinese stock markets in 2018 is the status of some of their main indexes. Both Hang Seng and Shanghai Composite are on their way down, with the latter dropping 25% in 2018 alone, which is its worst performance in a decade. The end of this year is showing no signs of this trend abating – in the first three weeks of December, Shanghai Composite went down 5% and the Dow about twice as much. But the difference between the two is almost 40% in favour of the Dow, with a reason for that also being the fact that big companies in the country use their stocks as a form of collateral in some cases when they want to loan money.

Conclusion

Chinese economy has suffered a hard year, no doubt about that. The stock markets took the hardest hit, with the main indexes falling constantly and significantly throughout the year. Not even the truce achieved with the US about the trade war between the two countries could improve the situation. The slow economy will receive some stimulation from the government in the following year, but it remains to be seen how big of an impact these moves will have. Indexes definitely seem to be on a slump, and the potential real estate bubble shouldn’t be overlooked either if you’re an investor, just like the yuan’s overall strength. Keep following our website for more updates in the new year.

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Author: Ben Prescott

Updated: January 25, 2019

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